IPOs: New York To Slow, Legend Picks HK
Bottom line: This year is likely to see 6-9 New York IPOs by Chinese tech firms, mostly in the $50-$100 million range, while Legend’s planned IPO in Hong Kong or China is likely to get a mixed reception.
A new forecast on Chinese high-tech IPOs for the year ahead is stating the obvious, namely that new listings are set to slow dramatically in 2015 after a bumper harvest in 2014. In fact, the record year for fund-raising in 2014 is a bit misleading, as it really represents about 3 years worth of offerings that accumulated during a frosty period that led to a near freeze for IPOs starting in 2011. Now that much of the backlog has been cleared, it’s not surprising that there are few major new companies that are still at the right stage of development for listings.
At the same time, another report says that Legend Holdings, parent of PC giant Lenovo (HKEx: 992), has decided to list in Hong Kong, forgoing previous plans to make an IPO in its home China market. That decision isn’t a huge surprise if it’s true, and could provide a highlight for international tech investors in this year’s muted IPO parade for high-tech firms.
According to a new forecast, about 6 Chinese tech companies may hold IPOs in New York this year, about half the number that listed in 2014. (English article) News of this year’s first major listing plan came just last week, when group buying site 55Tuan made its first public filing for a New York IPO to raise up to $40 million. (previous post) I only gave that plan a 50-50 chance of making it to market, as the company is still losing quite a bit of money and is likely to attract limited investor interest.
The report forecasting just a half dozen new New York listings this year comes from a trio of research houses, 86Research, Rosenblatt Securities, and JG Capital, and says the most likely candidates to make offerings are larger group buying sites Dianping and Meituan. Both sites are quite profitable, and each raised major new funds in the $700-$800 million range last month. (previous post)
I also previously predicted that one or both of these companies could make IPOs this year, though Meituan’s chief was quoted this week saying he’s not in any hurry to make such a listing. This latest forecast looks just slightly conservative to me, and I would predict we could see as many as 8 or 9 new listings this year if investor sentiment remains positive. But the quality of the companies is likely to be quite variable, and many of the listings could be in the relatively modest $50-$100 million range.
One of the year’s biggest tech listings is likely come from Legend Holdings, which media are now saying is likely to make its IPO in Hong Kong in the second half of this year. (Chinese article) Legend’s chief Liu Chuanzhi has been preparing for such an offering for the last few years, and a 2015 IPO would be roughly on schedule with his plans. The offering would raise $2-$3 billion, which could make it the year’s biggest tech listing.
The reports cite unnamed sources, and say Legend is currently in talks with several investment banks to underwrite the deal, including CICC and UBS. To call Legend’s offering a tech listing is a slight simplification, since the company has a large number of non-tech assets in its portfolio, such as its investment in a dental firm last year. (previous post) But 2 of its biggest assets are its stake in Lenovo and also its Hony Capital private equity arm, which has traditionally made lots of tech investments.
The latest report doesn’t cite a source for saying the listing will happen in Hong Kong, but several major Chinese firms have recently chosen the market after experiencing repeated delays for domestic IPOs in Shanghai and Shenzhen. I suspect Legend could ultimately still make a dual listing in Hong Kong and one of China’s 2 domestic stock markets, though the mixed nature of the company’s portfolio might limit its attraction to investors.
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